Underrated threats warning from Aon

At a briefing to present its findings, the broker also warned that risk managers run the risk of becoming dinosaurs if they only focus on insurable risk and transfer. Aon's newly published research is based on the results of its latest biennial Global Risk Management Survey (GRMS) that ranks the top 50 perceived risks facing organisations. However, Aon subsequently surveyed 100 executive and non-executive captive directors to further examine what it described as somewhat 'surprising' findings.hideIn Aon's GRMS survey 'computer crimes/hacking/viruses/malicious codes', or cyber risk, was ranked at 18. 83% of captive directors stated that this risk was understated in the survey. According to Rory Moloney, CEO, Aon Global Risk Consulting, Aon Risk Solutions, the reason for this underrating of cyber risk is partly an issue of ownership. "It is often not clear where this sits in an organisation. Also, despite the prevalence and the dramatic speed of this, we still lack data. And it is therefore difficult for the insurance market to respond," he said. Stephen Cross, Chairman, Aon Centre for Innovation and Analytics, added: "To us it was a really surprising result, cyber risk coming in at 18. In fact, it was a shocker given the level of damage that can occur with an attack. Our belief is that it is a major concern, should be a major concern for our clients and they don't really know it yet. It is probably the next asbestosis-type problem the world will face." Aon also felt that terrorism risk, which was ranked 46 in its GRMS survey, was underrated. 51% of captive directors agreed (62% in the Americas, 50% in EMEA, but just 38% in APAC). Mr Cross said it was a concern that terrorism was ranked so low. "Is it a case of 'out of sight, out of mind'? Complacency is an issue and we need to heighten the issue. Have global risk managers totally underrated this? You absolutely know, with a high level of certainty, that something will happen again on a major scale." Another concern raised by Aon was risk connectivity, with the broker pointing out that while damage to reputation/brand was ranked fourth, unethical behaviour was only at 43. Mr Maloney stressed that the two are linked and that the connection between unethical behaviour and damage to reputation is not fully appreciated. "These are things that can take a company down and we need to bring it to the attention of risk managers," he said. Aon pointed out that many of the top 50 risks are dependent on each other. Mr Maloney said that this increased complexity means there is 'compelling pressure' for a holistic, ERM-type approach to risk. Another issue highlighted by Aon was procurement of insurance versus risk management. "Procurement of insurance has a bias towards cost and risk management has a bias towards mitigation of risk. You need to have the procurement and risk management departments perfectly aligned. You have to be competitive, but you have to manage the risk. This is a fundamental issue to be resolved," said Mr Cross. Finally, Aon discussed whether the insurance industry needs to be more creative around product development to meet these increasingly complex risk exposures. Over three-quarters of the captive directors surveyed wanted the industry to be more creative and innovative. Mr Cross said it was about trying to bridge the gap between economic and insured loss. He pointed out that of the top 50 risks ranked in its survey nearly half are not insurable. Aon's view, he said, is that risk managers need to become more multi-dimensional with their understanding of risk, advisers need to do a better job of educating and consulting with clients on all aspects of risk-not just insurable risk-and carriers need to be more proactive and creative with their solutions. "Risk management may become a dinosaur if all it concentrates on is insurable risk," said Mr Cross. "A risk manager's responsibility, at the end of the day, is resilience and allowing the business to continue with the minimum disruption through an event. And the overwhelming view from the qualified non-executive directors that we surveyed is that the industry is not thinking hard enough about these issues."

Underrated threats warning from Aon

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